How can I optimize my rental income for tax purposes?
November 30, 2023 | 45,00 EUR | answered by Lorenzo Hartmann
Dear tax advisor,
My name is Selma Kleine and I have been renting out a condominium in the city for several years. So far, I have simply reported the rental income as additional income in my tax return without further exploring tax optimization possibilities. Now I am wondering if it would be wise to optimize my rental income for tax purposes in order to pay less taxes.
Currently, I am paying a relatively high tax rate on my rental income as it significantly increases my total income. I am worried that the high tax burden will ultimately reduce my profit from rental income and would like to find out if there are ways to improve my tax situation.
Therefore, my question to you is: What specific measures can I take to optimize my rental income for tax purposes and thus pay less taxes? Are there, for example, ways to deduct certain costs or expenses for tax purposes? Or are there tax depreciation options that I am not aware of?
I would greatly appreciate it if you could provide me with specific tips on how I can reduce my tax burden as a landlord. Perhaps there are also special tax regulations or laws that I have not considered. I look forward to your assistance and thank you in advance for your help.
Sincerely,
Selma Kleine
Dear Mrs. Kleine,
Thank you for your inquiry regarding the tax optimization of your rental income as a landlord. It is generally advisable to address this issue in order to improve your tax situation and ultimately benefit more from your rental income. In the following, I will provide you with specific measures and tips on how you can reduce your tax burden.
First of all, it is important to know that as a landlord, you can deduct various costs and expenses that are tax-deductible. These include maintenance and repair costs, management fees, insurance premiums, advertising costs, property tax, building insurance, and interest on loans used to finance the rental property. You can declare these expenses in your tax return as operating expenses and thus reduce your tax base.
Furthermore, there are tax depreciation options that can help you minimize your tax burden. You can depreciate the acquisition or production costs of the rental property over a certain period of time. This can be done through linear or declining depreciation. Linear depreciation is spread evenly over the useful life of the property, while declining depreciation provides for higher depreciation amounts at the beginning.
It is also important to note that there are special tax regulations and laws that landlords can take advantage of to reduce their tax burden. These include, for example, the small business regulation, the regulation for VAT exemption on the rental of residential space, or the possibility of input tax deduction.
Overall, it is indeed possible to optimize your rental income tax-wise and pay less taxes. However, it is advisable to consult a tax advisor who can provide you with individual advice and help you implement tax measures.
I hope these tips are helpful to you and I am available for further questions.
Best regards,
Lorenzo Hartmann
